Category Archives: bitcoin exchanges

Spoof orders, illegal on financially regulated markets, are on the rise and being exploited on largely unregulated Bitcoin and cryptocurrency markets. Demonstrable instances, perpetrated by a group or individual known as Spoofy, have occurred on Bitfinex and GDAX.

Spoof orders, or placed market trade orders that are not actually intended to be executed, are part of the rampant manipulation of traders on cryptocurrency exchanges. Trading into your own buy or sells is also illegal in the regulated financial markets, and it is suspected that this behavior has become more rampant in order to help Bitcoin price manipulators cut potential loses from their dubious activities. They also serve to sway trader behavior with massive sell and buy walls which are suggested to be the work of an individual or group, perhaps even the exchanges themselves going under the pseudonym of Spoofy.

Spoof Trading Ruled Illegal On Traditional Exchanges

With trading bots and API access to exchanges providing all the data needed for a coordinated manipulator, it isn’t a question of “is someone doing it?” so much as “who is doing it?”. Cases have been brought to light and prosecuted in the traditional stock markets, such as when Navinder Sarao pleaded guilty to spoofing offenses.

Using an automated trading program, or bot, Navinder’s actions contributed to the 2010 stock market flash crash. Then there is Michael Coscia who used a flood of small orders before canceling them to manipulate other traders. During Coscia’s trial, assistant US attorney Sunil Harjani said:

Traders contemplating sophisticated scams will think twice if they know that there are more significant consequences than a civil lawsuit or a regulatory action. […] Hedge funds and proprietary trading firms will closely review their trades, and strike down get-rich-quick manipulation trading schemes because the cost is not worth the benefit.

Is Spoofy Real? Evidence Seems to Point to ‘Yes’

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BitCrypto’ed provides plenty of evidence on the Hackernoon website on market manipulation (including the video above), alleging that the trade spoofing activity is primarily carried out on the Bitfinex exchange. According to the investigation, Spoofy is either an individual or group, but certainly a coordinated entity with an unrivaled amount of money to influence the market.

Laying out all of the evidence, BitCrypto’ed writes:

Spoofy makes the price go up when he wants it to go up, and Spoofy makes the price go down when he wants it to go down…And he’s got the coin… both USD, and bitcoin, of course, to pull it off, and with impunity on Bitfinex.

Marketwatch’sShawn Langolois, who appears to agree with BitCrypto’ed, further clarifies:

If Spoofy places a large buy order that entices smaller traders to hop aboard, he can turn around and instead use the uptick to execute a sell order.

Not Everyone Believes

No matter the evidence, however, there are still plenty of people who have yet to be convinced that a single person or entity could possibly be the sole driving force behind Bitcoin’s price.

Whether or not Spoofy is real, the practice of spoofing is very real and is already common enough to warrant rulings against it in the traditional stock market. Largely unregulated, cryptocurrency markets are still very much the “wild west” frontier of finance, a reputation hard to dismiss as exchanges and owners disappear or get arrested with alarming frequency. The same lack of regulation that makes cryptocurrency so attractive to many is also what allows modern day Butch Cassidys and James Gangs to get away with their misbegotten deeds.

Do you believe in Spoofy? Is he just a ghost story whispered of by grizzled traders? Let us know in the comments below.

Coinbase users are moving their funds to wallets and exchanges where they will be credited for Bitcoin Cash (BCC ) tokens, causing delays in Bitcoin withdrawals from the exchange.

Coinbase, the world’s largest (and often highest-rated) Bitcoin exchange, has made it clear that they will not honor the new Bitcoin Cash (BCC) token created by the Bitcoin blockchain split set to occur on August 1. Coinbase’s policy is to only support one version of a digital currency, as stated in a July 27 blog post:

Our policy is to support only one version of a digital currency. In order to determine which fork to support we look at factors such as size of the network, market value and customer demand. We make this decision carefully because safely supporting a new digital currency requires significant work for many teams.

Many other exchanges and wallets, however, are supporting the new blockchain and its token. Users with BTC funds in exchanges like Kraken, Bitfinex, and ViaBTC will be credited with an equal amount of BCC when the UAHF activates on August 1 at 12:20 PM UTC.

The Great Bitcoin Exodus

The result has been somewhat predictable: Users looking to scoop up “free BCC tokens” are now leaving Coinbase en masse and Bitcoin’s service has become degraded as a result. Coinbase’s status page now indicates that outgoing BTC transactions may be delayed by up to 12+ hours as they process their backlog.

Coinbase is also recommending that users who wish to withdrawal Bitcoins before the hard fork do so before 10 AM on July 31:

If you wish to withdraw bitcoin (BTC) before the hard fork, we recommend you initiate your withdrawal by 10am PT on Monday July 31st due to potential network congestion.

There’s No Such Thing as a Free Lunch

Given the stance many have taken that the BCC coin split will essentially be “free money” for Bitcoin holders, it seems almost common sense to leave Coinbase in anticipation of the hard fork. However, many have warned that there is no such thing as free money – any profits scraped from BCC will have to come from somewhere, in this case from the BTC price itself.

BCC is not free money! When BTC forks you will still have the same value but it will be split between #BTC and BCC. What happens next……

Speculation is also rampant over what will happen to the price of each currency. BTC supporters predict BCC recipients will quickly dump the new coin to buy more BTC, wiping out the new coin and driving the price of BTC back up as buyers scramble to acquire “free” Bitcoins.

Others remain cautious of any price movements, especially in the immediate aftermath of the fork. Kraken has already warned users in a July 27 notice that “margin traders should be very cautious across the fork” and to “plan for the possibility of extreme volatility”:

Margin traders are advised to be very cautious across the fork, by either reducing their position sizes or closing out entirely before the fork. In addition to the special provisions described above, margin traders should plan for the possibility of extreme volatility and unfavorable forced liquidations surrounding the fork.

Do you support the new BCC token? Do you think BTC holders will reap profit from the chain split, or will the volatility only drive down prices?

Denial-of-service attacks brought several major Bitcoin exchanges to their knees this week, leaving traders locked out of the system, as hackers reap the market rewards.

Ongoing Cyber Attacks

The DDoS attacks, timed to occur during intense periods of trading, gain the hackers a market advantage during price swings. Allowing them to game the price difference on compromised exchanges. Users are left locked out of the system during what could be crucial time periods of market activity.

Bitfinex, the largest U.S dollar-based bitcoin exchange has admitted that their platform was under DDoS attack. However, despite what they refer to as ongoing attacks, they do say that “Most users will be able to use the platform normally.” and released the following tweet;

The platform is returning to normal operations. We are closely monitoring the the situation

BTC-e is also believed to have been affected, as their site went down temporarily. They also posted a tweet acknowledging the issue though it has since been deleted.

Market Fears and Due Caution

While no coins were directly stolen from users during the attacks, the ensuing instability caused significant chaos nonetheless. Those who remember, or were victims of, the disappearance of the Mt.Gox and Cryptsy exchanges, know that Bitcoins should not be left on these platforms in case of more catastrophic attacks.

Users engaged in Margin trading on these sites are particularly at risk as they are unable to close their positions and stand to lose a lot of money if no stop-loss measure has been put in place.

In an interview with CNBC, Benjamin Roberts, co-founder and CEO of digital currency trading start-up Citizen Hex offered this warning to cryptocurrency investors:

Investors with assets on centralized cryptocurrency exchanges should be careful. The track records of these organizations are not good, and as the assets on the exchanges grow, so does the bounty for attacking or hacking them.

Unprecedented New Interest In Bitcoin

Bitcoin exchanges are also under the pressure of a surge of new users who are noticing Bitcoins price gains. The price of Bitcoin climbed to $3000 this week before plunging down to $2400, a move which does nothing to allay fears about the famously volatile coin.

Bitcoin exchange Coinbase has struggled to keep up with the massive influx of new customer registrations. CEO Brian Armstrong recently tweeted:

The CoinBase site has been down this week too, something they put down to the high traffic they were experiencing.

Should the exchanges be doing more to protect their users? Are they improving? Have you had an experience with the exchanges you’d you like to let Bitcoinist know about? Let us know in the comments below.

20 Bitcoin Exchanges have agreed to list Bitcoin Unlimited (BTU/XBU) as an altcoin, if a hard fork should occur.

BTC & BTU

In the midst of a heated discussion on the scalability and future of Bitcoin, a group of 20 Bitcoin exchanges, including major eastern and western ones, have announced that should a hard fork occur, they will list BTC (Bitcoin Core) and BTU (Bitcoin Unlimited) as two separate currencies.

This decision, backed by BitFinex, BitStamp, Kraken, BTCC, BTCChina, ShapeShift, BitSquare, QuadrigaCX, and other exchanges, was announced in a joint statement.

This announcement reads:

Since it appears likely we may see a hardfork initiated by the Bitcoin Unlimited project, we have decided to designate the Bitcoin Unlimited fork as BTU (or XBU). The Bitcoin Core implementation will continue to trade as BTC (or XBT) and all exchanges will process deposits and withdrawals in BTC even if the BTU chain has more hashing power.

These exchanges have pledged to only add Bitcoin Unlimited (BTU) as an altcoin only if both chains can be run without any conflicts, something that currently is a concern due to the risk of transaction replays.

A few hours after this announcement, Poloniex and BitMEX joined in as well, both supporting the plan released by the other exchanges. BitMEX in particular stated:

BU will not be listed or used as a deposit/withdrawal currency until replay protection is implemented and BU is not at risk of a blockchain reorganization if the Core chain becomes longer.

Transaction Replays & Hard Forks

This isn’t the first time a major cryptocurrency has come under danger of hard forking; in fact, Ethereum experienced a similar situation last year. However, this wasn’t without mishaps; Ethereum experienced a number of replay attacks after the fork.

A replay attack is where a transaction carried out on one chain is broadcasted on the other chain. For example, Bob may want to send BTU to Alice. However, this transaction could be rebroadcast on the BTC chain, meaning that Bob would lose both his BTU and BTC.

The announcement states that the exchanges will only list Bitcoin Unlimited if the replay attack vector is eliminated, such as by changing address formats or moving coins to new addresses.

“[N]one of the undersigned can list BTU unless we can run both [blockchains] independently without incident. Consequently, we insist that the Bitcoin Unlimited community (or any other consensus breaking implementation) build in strong two-way replay protection,” the group said. “Failure to do so will impede our ability to preserve BTU for customers and will either delay or outright preclude the listing of BTU.”

The End of the Road for Bitcoin Unlimited?

This new decision could be a devastating blow to Bitcoin Unlimited’s (BU) approach in what has been a tough week for BU. Earlier this week, a critical bug was discovered and later patched, but not before taking half the network’s nodes offline and leading many in the community, including Andreas Antonopoulos, to question BU’s code QA (quality assurance) process.

BU has shipped an exploitable bug on a code base that is 0.001 of the size of Core’s. That’s several orders of magnitude worse QA process

Additionally, according to coin.dance, a large majority of the companies and services in the Bitcoin Space prefer SegWit over Bitcoin Unlimited by a wide margin.

Furthermore, a majority of miners also support Bitcoin Core. However, if Bitcoin were to fork off into Bitcoin and Bitcoin Unlimited, the loss of a large amount of hashpower could still be detrimental to Bitcoin.

Many users and prominent community members have also voiced out against Bitcoin Unlimited, believing that it is a rash and unprofessional attempt to scale bitcoin or even an “attempted robbery.” Some have even gone as far as to suggest a User Activated Soft Fork (UASF), a type of fork where nodes actively reject blocks that don’t signal for SegWit activation.

However, this might not even be necessary, seeing that many exchanges will now only see Bitcoin Unlimited’s approach as an attempt to create an altcoin.

Do you think that Bitcoin Unlimited will try to hard fork the network? If so, do you think that their chain will survive? Let us know your thoughts in the comments below!

Recently in a post on their blog, Shapeshift.io has warned users of various scams that are taking place on social media and attempt to lure users into depositing cryptocurrency on impostor sites such as “shapeshit.io” Shapeshift has released a detailed report to help users protect their funds and avoid falling victim to these attacks.

Potential Shapeshift-based scams

Shapeshift.io has identified the following as the most common scam attempts on social media:

Twitter accounts asking people to take surveys and then send a certain amount of bitcoin to be exchanged via twitter DMs

Twitter account asking people to send a certain amount of bitcoin to be exchanged via twitter DMs Copy cat website that looks like ShapeShift.io but is spelled “ShapeShit.io” that provides you with a deposit address but does not do the exchange.

Other copy cat websites that look different from the ShapeShift site but offer instant exchanges and provide you with a deposit address but does not do the exchange

Shapeshift further clarified that they would never ask users to send cryptocurrency to an address through social media and also identified all of their authentic social media channels so that users can watch out for fake accounts claiming to be the company. Because their platform is completely open source, people are able to create impostor websites using the same API which will allow for deposits but won’t complete the exchange, this results in a loss of user funds.

Shapeshift users are encouraged to always check the URL before depositing funds and always check that the HTPPS protocol is correct on the URL bar. Another telling sign of a fake site is an unusually high deposit limit. At this time, limits above 100 BTC do not currently exist on Shapeshift. Users can report impostor and scamming sites and Shapeshift will work to remove them.

In closing, be very careful as these scams are becoming more common. Take precautions to ensure that you are using the legitimate Shapeshift to avoid theft and falling victim to a scam. You can read Shapeshift’s blog post right here.

Have you seen any potential Shapeshift-based scams? Let us know in the comments below!